Here Comes the Weak End ~ The Risk Averse Alert

Thursday, October 13, 2011

Here Comes the Weak End

Might the market's advance off last Tuesday's bottom (10/4) peak sometime tomorrow, then be followed by a throttling into close giving back all of this week's gains?

Each of the past three weeks has concluded with some notable measure of weakness, with last week's lift occurring on the back of fairly even weekly advancers versus decliners on both the NYSE and NASDAQ. So, we're due for a letdown, particularly given what's ahead.

SPX 5-min

If this morning's low marked the end of wave 4 of c (per yesterday's slightly revised wave count), then an additional sign of increasing underlying weakness might appear by way of a fifth wave failure, as wave 5 of c completes tomorrow morning. Already, a first sign of weakness appears by way of fading relative strength over the duration since last Tuesday's wave b bottom. Today's RSI dip to a fair sell-side extreme at 5-minute intervals furthermore heralds approaching trouble.

SPX 1-hr

At 1-hour intervals is confirmation of the wave count applied to wave c up from last Tuesday. Likewise is the dynamism of an Elliott third wave shown with the buy-side firmly in command over the entire duration of wave c's unfolding.

So, with the gamut of assorted technical measures regularly detailed in these parts currently at relatively favorable, prospective turning points, keep an eye out tomorrow for a dose of weakness yet further belying the market's advance over the past seven days and an hour.

Fast Money
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JD said...

My friend, you missed the bottom. At the point of maximum pessimism, you failed to see the opportunity and succumbed to the moment as do most investors.

You need to let go of Elliot Wave and the need to be intellectually right and focus on making money, instead.

There will be a pullback and you should buy it. Good Luck.

TC said...

No sir. No bottom on account of the expansion of NYSE-listed issues joining the ranks of toilet paper at the start of the month, when August lows among major indexes uniformly were being taken out, thus confirming the prospective Elliott wave count of mine supposing in progress are five waves down from July 2011 [wave B] peak targeting index levels last seen in the 1987-1994 period.

The market's advance since Tuesday, October 4th is viewed simply a "c" wave of an a-b-c corrective wave forming following a 5-wave decline from early-July peak (these forming but the 1st wave of 5 larger waves down). In its formation an increasing measure of underlying technical weakness has registered. Thus, five waves down from early-July are objectively judged but a beginning and not an end.

Ignore at your own peril increasing relative strength weakness over the past year, particularly that occurring well prior to August's throttling. This condition is precisely the opposite of that leading into April 2010 peak. Thus, on this front basis for expecting a similar advance to that following late-June 2010 bottom is not particularly sound. Likewise, fading momentum since May 2009(!) supports my view that, weak hands have succeeded only in delaying their doom. These weak hands have amply revealed their dominance in a receding volume of shares exchanged over the duration of the market's advance off March '09 bottom. This revelation was particularly stark during the market's advance into early-July 2011 peak. It only has been all the more vividly revealed again this week.

I don't see "maximum pessimism." Rather, I see a pervasive irrational exuberance for capacity of strapped lenders of last resort to sustain wildly inflated -- mis-priced -- valuations on financial assets of all sorts. That the gig is up only has become plainer by the day for months now. A growing mass strike throughout the United States but confirms the end of support from lenders of last resort is nigh (at least anything capable of sustaining status quo perceptions toward the effect of further bailout -- be it by hyperinflation or deflation, equities are doomed).